Please tell me again how Tulips are like Bitcoin, because they just seem so, very, different to me. But I'm probably missing something.
I’m referring to tulipmania in the 1600’s. This was hightlighted in the book written in the 1800’s: https://en.m.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds Tulips still have some utility, as do Cryptos. The question is at what point does price exceed this utility by an unsustainable margin? There was a period of time a few years ago, it was a challenge to get a single U.S. dollar for a Bitcoin. What has changed? The “fundamental utility” of Bitcoin has not changed. There is now certainly widespread and increasing recognition of the utility of the Cryptos. But again, what is the reasonable price that reflects the utility of the currency? Listed below is some basic questions that should be answered when considering the utility of a currency: Are there reasonable substitutions in the market for the currency? What are the relative transaction costs? How difficult is it for supply to increase? How long does it take to confirm a transaction? Are there privacy considerations? Are there regulatory concerns? Are there protections concerning safety of funds and fraudulent transactions? To me, in answering the questions above, it seems evident that most of the price in Bitcoin represents speculative demand and subject to changing perceptions of crypto market participants. With ever increasing supply of various cryptos, this market will reach a tipping point where price appreciation will cease and speculative expectations will wane. When this happens, Bitcoin’s price will likely soon adjust towards it’s utility based value.
Your arguments make sense, but my point is that you simply cannot compare Tulip Bulbs to a digital currency. It's borderline nonsense. Bitcoin is meant to be money, tulip bulbs were traded as an asset. The comparison is so specious as to be financially illiterate. Here are the 7 traits of money (Aristotle, still generally accepted): durable, divisible, convenient, consistent (fungible: 1 = any other), possess value in itself (an impossible to prove metric), limited supply, long history of acceptance Bitcoin easily passes 5 of these, with history of acceptance and innate value being arguable. But innate value is a weird concept anyway - for value cannot exist without a valuer to need it, therefore, nothing has innate value. Value is always and only perception. It only has value as utility to people. Bitcoin does have global (broad, rather than long) acceptance as money (not as currency, I am not saying it is very useful to purchase things, though there are credit cards which convert to fiat - that is a discussion topic of interest). Tulip Bulbs do not belong in this list of concepts - NOT durable, marginally divisible, inconvenient, non-fungible, possibly have inherent value as beauty, supply can be rapidly increased, and no history of acceptance. It just seems completely silly to actually compare the 2 things - like comparing a flower seed to an unbreakable, decentralized ledger entry or something.
My comparision was not a functional based comparision. It was a conceptual based comparison. The concept I was trying to relate is an asset of controversial utility being valued beyond assets that have more established utility. Gold has dropped about 99.9%, priced in Bitcoin, versus Bitcoin’s inception price. The utility of gold has not changed. There is a interelationship between the markets that will eventually correct relative mispricing. Bitcoin will not be an exception to this. And this time is not different. Remember the tech bubble?
I do remember the tech bubble. I remember, after it popped, that AMZN was about $6, PCLN was about $4, for example. Also, the general comparison is that the Tulip bubble is akin to the Bitcoin bubble. The tech bubble would be a FAR better comparison. There are many more similarities between stocks and BTC. Tulips never came back up again, but the strong stocks did. So, I think, will it be with solid blockchain tickers.
We would think so, but: 1. When BTC drops, so does everything else, there is no flight to quality. 2. The same arguments (copyable, constant and better competition, etc.) still apply to any solid blockchain cryptos.
Maybe BTC has become a big poker table, with people exchanging chips, new ones sitting down, others cashing out.